The Alternative Minimum Tax was created in the ’60s to prevent a handful of wealthy taxpayers from exploiting loopholes and not paying income taxes. It was not, however, indexed for inflation, which means the AMT is poised to hurt the middle-class. Everyone says they want to fix the AMT, but it’s expensive — costing up to $100 billion in 2010 alone.
Congressional Dems created a fiscally-responsible plan to “fix” the AMT without increasing the deficit and without adding additional burdens on the middle class, but the legislation fell apart before the Thanksgiving recess. Republicans and Robert Novak want to blame the congressional majority. Republicans and Robert Novak know better.
Habitual congressional gridlock usually has no impact on the lives of ordinary Americans. But what happened on the Senate floor last Friday just before lawmakers left for their Thanksgiving break will delay tax refunds next year for some 50 million taxpayers who count on them.
The AMT will be “patched” to provide relief, as it has been in every Congress, but not in time this year. Refunds totaling more than $75 billion will arrive many weeks late not only for taxpayers earning $100,000 to $200,000 who are unintentionally affected by the AMT but also for lower-income persons because the IRS refund procedure will be disrupted by the delay.
Senate Majority Leader Harry Reid’s eleventh-hour effort to fix the problem on Friday collapsed when he refused to open the proceedings to votes on Republican tax-cutting proposals.
Got that? The AMT “patch” fell apart because Reid and Senate Dems “refused” to couple tax cuts with more tax cuts.
Kevin Drum added some helpful context.
Here’s the backstory. Democrats wanted to pass a quick bill to patch the Alternative Minimum Tax, and Novak admits that Reid “was serious about taking action.” But Republicans refused to allow the AMT tax cut to be brought up in the Senate unless four other tax cuts were also brought up. Gotta balance a tax cut with a tax cut, after all.
In other words, Democrats were perfectly happy to pass the AMT cut immediately. The only thing stopping them was Republican posturing. But somehow it’s Harry Reid’s fault.
Novak added:
The GOP political reaction was previewed by a Senate Republican Communications Center news release last week titled: “Democrat Delays Put Millions of Middle Class Taxpayers at Risk.” But one senior Bush administration official privately expressed fear that Republicans would get blamed.
Of course they’re worried — they deserve the blame because they screwed up the policy.
Again.